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Saudi Arabia Sends Wave Of Supertankers To U.S. Ahead Of Oil Meeting

The world’s top oil exporter, Saudi Arabia, is making good on its promise to flood the world with oil even as demand collapses, with a surge in tankers carrying Saudi crude to the United States, tanker-tracking data compiled by Bloomberg showed on Wednesday.

Last month, when Saudi Arabia pledged to flood the markets with oil, the Kingdom’s crude oil exports to the U.S. hit a one-year-high of 516,000 barrels per day (bpd), according to the data compiled by Bloomberg.

So far this month, at least seven supertankers carrying a total of 14 million barrels of oil are currently traveling to the U.S. Gulf Coast. This compares to just 2 million barrels of Saudi oil en route to America in the same period in March. Almost all tankers are chartered by the Saudi state-run shipping firm Bahri, according to the data compiled by Bloomberg.

Just after the collapse of the OPEC+ production cut deal in early March, Saudi Arabia’s Bahri was understood to have hired multiple very large crude carriers to carry all the extra oil that the Kingdom planned on exporting in April—a rare move indeed for the shipping company that sports its own fleet of 41 tankers.

The surge in Saudi oil exports coincides with a colossal demand loss around the world due to the coronavirus pandemic, and some analysts see global oil demand in April crashing by 30 percent, or by 30 million bpd, compared to the world’s typical levels of consumption.

While the major oil producers in the world are trying to forge a broader production cut deal, Saudi Arabia isn’t changing tactics - at least not this month; cargoes were scheduled weeks ahead, Fotios Katsoulas, Liquid Bulk Principal Analyst, Maritime & Trade, at IHS Markit, wrote this week.

According to IHS Markit Commodities at Sea, the Saudis are pressing ahead with more crude oil exports as promised.

“Saudi Arabia was exporting close to seven million barrels a day, but current activity stands above nine million barrels a day,” Katsoulas said.

The Kingdom is ready to further boost its exports, despite growing diplomatic pressure for a global deal, the analyst noted.

“At least 18 ballast VLCCs are currently positioned very close to Saudi Arabia's oil terminals of Ras Tanura and Yanbu, which could load around 36 million barrels in total,’’ according to IHS Markit Commodities at Sea.

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The logic process of the Saudis must be different from anybody else. What benefit does Saudi Arabia get from adding 14 million barrels to a global oil market already sagging under a glut estimated at 1.8 billion barrel and a global oil market declining by some accounts by 30 million barrels a day (mbd) or 30% as a result of the coronavirus outbreak.

Moreover, if these shipments are intended for American buyers, then they are going at such discounted prices which will further accelerate the anger of the US shale oil producers who accuse Saudi Arabia of pushing them to the verge of collapse by its oil policies.

If, however, they are intended for the 50%-Saudi owned Motiva refinery in Port Arthur, Texas, then the intention is to improve Saudi share in the US oil market something the American public isn’t well disposed towards since 9/11 and also the realization that Saudi Arabia’s declared objective from flooding the global oil market is to kill if not slow down US shale oil production.

Saudi Arabia is hoodwinking the world by claiming that it has lifted its crude oil exports by 2 mbd from 7 mbd to 9 mbd. Nothing is further from the truth. To raise its oil exports to 9 mbd, Saudi Arabia must produce 12.7 mbd including 3.7 mbd for domestic consumption. But Saudi Arabia has never ever had such a production capacity and will never ever achieve one. So the talk about raising its exports to 9 mbd is a farce. Saudi Arabia can at best produce some 8.0-9.0 mbd with another 700,000 b/d to 1.0 mbd coming from storage. This is so because its current production comes from five giant but aging and fast-depleting oilfields discovered more than 70 years ago.

The extra two mbd exports could have only come from its oil storage. Still, it can only resort to such a practice for a limited period before it depletes its storage thus weakening its position in the global oil market. It might, however, try to use the 2 mbd extra exports as a bargain chip when discussions at the coming OPEC+ meeting focuses on production cuts.

Simple, so not let them doc and send than back. More over, create the anti OPEC with another basket option and organized countries so not buy oil from Russia or Saudi. They will learn the lesson.

Ahmed Rabie on April 08 2020 said:

I am just worried from the theory that this is all a very well designed plan run by MBS to weaken Saudi future position in oil market by exporting from Saudi's reserves. That becomes the starting point of the end of this country.

Steven Scales on April 09 2020 said:

There flooding the market, making oil cheap and crippling Russia economy
For not wanting to slow production and control prices. This way Russia makes less per barrel....

A. Schmitz on April 09 2020 said:

Did I miss something? Why would we want a "wave" of Saudi oil when they have priced us out of our own oil exports?

Elia Mazzawi on April 09 2020 said:

Why should Saudi be the swing producer and stabilize the market for everyone else's benefit and it's detriment. While all other producers pumps
as much as they possibly can.

The choronavirus demand collapse is a great opportunity for them to hurt the competition so they can come up with more market share after this is over.

20 years from now oil will be worthless as an energy source. If you do not like 20 then ok 30 years. So pump and sell as much as you can while you still can.

Steven Miles on April 09 2020 said:

We need real leadership in the US that really will protect American industry. We let china dump on our manufacturing and the Saudis dump on our energy. We should simply refuse to allow the ships in American waters. If the Saudi's dont like it, and keep pushing, then offer to confiscate their refinery and turn it into an American owned refinery. Finally, we need to stop selling the Saudis weapons. This attempt at destroying our production at a time like this should be considered an act of war. We don't need to immediately start bombing, but the Saudis need to know not to f with us. Another option would be to simply confiscate every tanker they send, and add it to the national reserve. Let the ships rot in port while we find or build storage or figure out what to do with it.
Unfortunately this won't happen because we have no leadership. We can't even deal with a toilet paper issue much less an energy issue. Nero tells us how great his press conference ratings are while Rome is burning. Can we please get some real adults running things.

John Di Laccii on April 10 2020 said:

It should be remembered that MbS was not always the natural successor to the current King: prior to June 2017 when the succession was changed in MbS’s favour, the heir-designate was the recently-arrested Prince Mohammed bin Nayef, whilst the also recently-arrested Prince Ahmed was one of three members of the Allegiance Council (the senior royal organisation that endorses the line of succession), to oppose MBS’s appointment as crown prince in place of his cousin bin Nayef in 2017. Precisely why MbS thinks that potentially bankrupting his country, spending the remainder of its dwindling foreign assets reserves, and alienating its only significant ally in the world is a mystery but whatever the reason both the U.S. and Russia will be perfectly happy to watch on the sidelines to see exactly how it all pans out for MbS.

steve titcomb on April 12 2020 said:

Doctor,

I fully agree with your comments. One thing to note is the Saudis took over full operation and ownership of the refinery in Texas in 2017. Looks like they are moving the oil in SA to the Texas. A one time event

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